Personal Finance

Don’t blow your money on baby gear; invest in college instead

MCT

Editors note: This adapted excerpt comes from “Not Buying it: Stop Overspending and Start Raising Happier, Healthier, More Successful Kids,” by Brett Graff, a regular contributor to the Miami Herald.

Spending money to keep up with our friends is so pre-recession.

Everyone knows emergency funds are the new extravagance. But when it comes to raising kids, we re still overspending big time, hemorrhaging money by mistaking luxuries for necessities and doling out more dollars than we save. And why? Because we're afraid that cheaping out means our kids will fall behind in school, sports, or social activities. And in a high-pressure parenting climate, there is no room for error; academic admissions are competitive and — down the road —jobs are scarce. We're terrified our kids won t get into college and will even later wind up homeless. Or worse, wind up living in our homes.

Case in point:

The editors of a popular baby website have compiled for their large community of moms-to-be a list of the best strollers around. One such model reminded the editorial panel of a transformer, and the group collectively gushed about how you can even charge your cell phone with this bad boy. This stroller, like nearly all the editors’ picks—including one you can carry on your back (which makes one wonder why you wouldn’t just carry your baby)—costs more than $800.

All together, in the United States we bought about $5.8 billion worth of baby stuff online in 2013 and about $11.9 billion in stores that same year, according to research from IBISWorld. We can in some cases do a better job of parenting if we calm down long enough to stop adding things to our carts. Yes, we’ll need to buy for our babies but while considering our choices, we have to remember that the most expensive versions with the fanciest features are not—under any circumstances—safer. They’re not more educational. They won’t make our infants happier. There is, however, one critical place to put your money right now: college savings. Here’s why

▪ Cribs: The one and only feature your infant crib must have is a manufacture date of June 28, 2011, or later, as current safety standards apply only to cribs made after that date. The $895 Vanessa sold by baby-store-to-the-stars, Bellini, and the $159 Graco sold by website-to-the-unshowered, Amazon.com, have been subject to the same inspection process.

▪ Monitors: To protect against the dangers posed at bedtime you’re likely ready to invest in a baby monitor, big time. Video monitors —s ome costing $350 — make it possible to watch real-time footage of your baby; even sending the action to your smartphone. But if your camera is hacked — and let’s be very clear, your camera can be hacked — there will be some unwelcome company in your baby’s room. Good news: traditional baby monitors sell for $13.99. Would a streaming video of the kid help you sleep better? News flash: New parents are not afforded the luxury of sleep.

▪ Bath seats: More than 471 babies less than 24 months old died in bathtubs between 2006 and 2010, according to a report from the Consumer Product Safety Commission. The most common reason, says the report, is that the children were left alone while caregivers figured for just one moment they could tend to other activities. A strong and expensive bath seat would not have saved them. And may provide a false sense of security. An on-site adult, on the other hand, could have.

▪ Car seats: If you want to protect your child from death, then car seats are totally the way to go. Heather Darby, child passenger and safety coordinator at the Minnesota Department of Public Safety says the most effective seats 1) best suit our children’s height and weight and 2) are easiest to install — because a car seat cannot perform its life-saving mission unless it’s properly installed. The most expensive can have additional seat belt glides or seat belt locks that complicate instillation.

▪ Feeding: I would as a personal opinion say that money for infant formula is well spent, but economists and researchers and doctors — essentially the entire free world — point to the benefits of breast-feeding. The National Resources Defense Council even has a handout, reminding us all that mother’s milk strengthens a baby’s immune system, reduces ear infections, and protects against allergies, dental cavities, and cancer. Formula costs $800 a year, says the NRDC and formula-fed infants had $68,000 in health care costs over a six-month period compared to an equal number of nursing babies, which had only $4,000 of similar expenses.

Put Your Money Here: There is only one purchase you can make that’s proven to drastically improve your child’s life: a college education. People with college degrees have higher incomes and less joblessness, according to the College Board. They’re more likely to have health insurance and are less likely to be obese. People with college diplomas more often volunteer in community organizations and less frequently smoke than those with only high school degrees. College graduates are more likely to vote.

What does this have to do with a crib? You’ll want to buy the cheaper one and invest the cash. Because raising a nonsmoker who works and votes is very, very expensive. By the fall of 2033, one year at a public, in-state university — tuition, fees, room, and board — could cost $47,867, while one year at a public out-of-state school could cost $69,023, according to estimates calculated by Kalman A. Chany, author of Paying for College Without Going Broke and president of Campus Consultants Inc. Private schools could cost $107,189 a year and an average Ivy League could cost $149,327. Putting aside $1,000 today would — if invested earning 7 percent interest — be worth $3,379 by in 18 years.

So you see, a super-expensive nursery could pull our kids back from more quickly achieving world domination. Instead, we should each decide how much money to set aside each month using an online college savings calculator (there’s one at ChooseToSave.org). And then direct those dollars into one of the following accounts:

▪ Section 529 Savings Plans: Don’t let the name bore you — Congress must have figured, “Why come up with pleasing names when you can just call things by their tax code?”— because these funds can have some exciting benefits. Putting your money into one of these plans is the same as buying a mutual fund that invests in stocks, bonds, or a combination. But if there are profits, you won’t have to give the government its share of the taxes.

▪ 529 Tuition Plans: These plans [such as Florida Prepaid] prelet you lock in college for tomorrow (18 years’ worth of tomorrows) at today’s rates. You buy units or credits or years of college today (read: today’s prices) at in-state schools. And you can cash these in when your kid enrolls. It’s a pretty good deal considering college tuition and fees are projected to rise by between 5 percent and 7 percent, according to the estimates from Campus Consultants.

▪ UGMA (Uniform Gift to Minors Accounts): These are accounts we can open in our kids’ names. The child won’t pay taxes because it’s considered a gift, but if you give more than $14,000, you’ll have to start writing that down because you’re allowed to give only $5.34 million without paying taxes throughout your lifetime. So clearly, you’ll want to be careful with that. Because UGMA accounts are in the kid’s name, one of three potential panic-inducing problems could occur. First, because the kid is the account holder, this money will count against anyone applying for financial aid. Second, when this child turns eighteen years old, he or she can use it to buy motorcycles or whatever seems like a good idea to an eighteen-year-old. The benefit is flexibility; you’re not tied to a particular account and you don’t have to use the money for school.

▪ Taxable Accounts: Hey, if you’re an investment wiz, then to hell with all those special accounts and their fancy tax benefits. You can put aside as much money as you like, invest it, and use it to pay for college.

“Not Buying it: Stop Overspending and Start Raising Happier, Healthier, More Successful Kids,” by Brett Graff, is available from Seal Press, a member of the Perseus Book Group.

BOOK READING

Miami Herald contributor and author Brett Graff will read from her book, “Not Buying it: Stop Overspending and Start Raising Happier, Healthier, More Successful Kids,” on Wednesday, April 20, at 8 p.m. at Books & Books at the Arsht Center, 1300 Biscayne Blvd. The event is free.

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